Miller Orr Return Point Formula
Miller orr return point is
calculated by the following formula. It is a point which is to be regained when
cash hit a lower or upper limit. A control action should be taken in a way that
it will restore the position to return point.
Return point = Minimum level + 1/3 (Spread)
Miller orr return point Formula Example
|
Minimum
cash level is
|
$ 28,000
|
|
Cash
fluctuation spread
|
$ 10,000
|
Calculate the return point?
Solution
Return point = Minimum level + (1/3 x Spread)
=
28,000 + 1/3 (10,000)
=
$ 28,000 + 3333
=
$ 31,333
